SPECIAL BOND BUBBLE ISSUE
Featured Trades: (RESIDENTIAL REAL ESTATE), (BAC)
2) Another Nail in the Coffin for Residential Real Estate. Those few, like myself, who believe that the residential real estate market has another down leg ahead of it, got their smoking gun yesterday. July existing home sales cratered 27.2% to a seasonally adjusted rate of 3.83 million units, the sharpest month to month drop in history, and the lowest sales pace since 1995. YOY sales are off 25.5%, and the June figures were also revised down. Inventories are now at a 12.5 month supply, the highest on record.
Low end buyers totally bailed on the market. It looks like the baby boomer effect is hitting the market big time, as I have been detailing in my endless posts on the subject (click here for ‘The Hard Truth About Residential Real Estate’). It is also now screamingly obvious that the net effect of the $8,000 first time home buyers tax credit and similar, complimentary efforts by the states has been to pull forward purchases of homes, not create new demand. Like this was ever in doubt?
I can tell you one thing for sure. Bank share prices have not yet discounted weaker home prices, and the bleeding collateral this implies. The 36% decline that Bank of America’s (BAC) shares have suffered since April may not be enough. Again, rent, don’t buy, unless you plan on living there for ten years, and don’t mind giving up your first born child for collateral.